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Contradictory reports won’t stop Saudi economic reforms

Contradictory reports won’t stop Saudi economic reforms

Faisal Mrza

August 30, 2018 12:26

The news agency Reuters carries at least one article daily about Saudi Arabia. In recent articles, negative quotes about the Kingdom have come from “a former senior Western diplomat,” “a senior banker,” “a senior financial adviser,” and “senior industry sources.” Apparently, named sources are now optional in news reports — at least for Reuters.

It was no surprise then that on Aug. 22, the agency put out an “exclusive” story that quoted unnamed “sources” advising that Saudi Aramco’s initial public offering (IPO) was halted. This was contradicted, in the same report, by quotes from the Saudi energy minister in which he denied that the IPO had been called off.

Reuters followed up its initial report on the supposed cancellation of the Saudi Aramco IPO with a second story two days later. In that story, the news agency ran negative quotes concerning the crown prince from an analyst at a Canada-headquartered financial institution, a blogger with a proven record of animosity toward the Kingdom, and an unnamed former senior Western diplomat. The accusations put forward in the Reuters story included personal slights couched in innuendo.

The second story about the supposed cancellation of the Aramco IPO was extremely strange. The headline was negative and the report was peppered with bleak commentary. Yet to make the writing seem fair and balanced, the authors were forced to include facts which showed the Kingdom in a positive light. For instance, the article mentioned that “the reform program was far bigger than the Aramco IPO,” “many changes could still go ahead, or even accelerate,” “the state budget deficit has narrowed sharply,” “MSCI and FTSE Russell decided this year to add Saudi Arabia to their emerging market equity indexes,” and many more positive developments.

Despite all this unprecedented economic movement, it seems that some reporters are working to fulfil an agenda attempting to show that Saudi Arabia is failing in the great national economic reforms.

Faisal Mrza

Reuters’ articles doubting the social and economic reforms of the crown prince’s Vision 2030 program came just after the International Monetary Fund (IMF) released a report praising the economic reforms adopted by the Kingdom and encouraging the government to do even more. The IMF stressed that the continuation of the reforms will help the government achieve fiscal goals and stimulate non-oil income growth, which is the main strategic goal of Saudi Vision 2030.

“Fiscal reforms are continuing,” the report said, adding that “efforts are ongoing to improve the business environment, develop a more vibrant SME sector, deepen the capital markets, increase the involvement of women in the economy, and develop new industries with high potential for growth and job creation.”

The IMF pointed out that the last period witnessed good growth in the Saudi economy coupled with successful control of inflation. The IMF also praised the Saudi move to amend the fiscal balance program and extend it to 2023. The IMF noted that “reform momentum remains strong under Vision 2030. New reform initiatives are being rolled-out under the Vision Realization Programs (VRPs).”

The IMF remarks illustrate Saudi Arabia’s progress since the introduction of Vision 2030. The Kingdom is trying to boost private-sector growth and maximize the assets of the Public Investment Fund (PIF), which amounted to SR840 billion ($224 billion) at the end of 2017, compared to SR570 billion in 2015. The goal is to double the assets of PIF to SR1.5 trillion by 2020.

The PIF Program (2018-2020) is one of the Kingdom’s 12 Vision 2030 VRPs. The program acts as a roadmap for the next three years to strengthen PIF’s position as the engine behind economic diversification in the Kingdom and its role in transforming Saudi Arabia into a global investment powerhouse. PIF aims to complement private sector development in the Kingdom through its new domestic investment, split between PIF’s Saudi Holdings, Saudi Sector Development, Saudi Real Estate & Infrastructure Development and Saudi Giga-Projects.

PIF recently raised an $11 billion international bank loan which was massively oversubscribed by eager lenders. Reports are that Blackstone Group LP is nearing a first close of $5 billion for its inaugural infrastructure fund to which PIF pledged a dollar-for-dollar commitment, up to $20 billion.

PIF has substantial investments in SABIC, Saudi Telecom, National Commercial Bank, the Saudi Arabian Mining Company (MAADEN) and Saudi Electricity. It also has interests in Uber and SoftBank Vision Fund, among others, and is involved in the Red Sea Project, NEOM and Qiddiya developments. All its new initiatives are designed to diversify the fund’s investments, in line with the goals of Vision 2030.

In its report, the IMF mentioned that the Saudi government should continue to work on clearly defining its fiscal objectives. Its focus must be on strengthening fiscal strategy planning, enhancing fiscal reporting and monitoring, and strengthening budget execution. The report also recognized the government’s policies to reduce the large fiscal deficit, strengthen the budget process and the fiscal framework, and increase transparency. The IMF report is a reliable reference for those looking for the truth.

Despite all this unprecedented economic movement, it seems that some reporters are working to fulfil an agenda attempting to show that Saudi Arabia is failing in the great national economic reforms put forward by Vision 2030. Their articles repeatedly question whether the Kingdom can meet its stated goals — with no evidence to the contrary. Such articles are deliberate attacks that aim to sow doubt about Saudi prosperity and the potential of the Kingdom’s young population to thrive.

• Faisal Mrza is an energy and oil market advisor. He was formerly with OPEC and Saudi Aramco. Reach him on Twitter @faisalmrza

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